Edition: September / November 2015

Employee benefits mean
good business for SMEs

The recent Old Mutual SME Employee Benefits Monitor 2015 shows that umbrella funds can not only help staff of small and medium enterprises (SMEs) to achieve their retirement goals, but also support SMEs to address some key challenges they face, such as attracting and retaining quality staff.

The SME staff interviewed showed a clear preference for retirement funding (92%) and some type of medical cover (82%) as the two most important employee benefits. Funeral cover was the third most sought-after employee benefit (17%).

A key findings of the Monitor was that the size of the SME plays a large role in whether it offers some form of employee benefits to staff, with the percentage of SMEs offering some type of group employee benefits rising significantly as revenue and staff numbers increased. (See Table 1)

Table 1: The provision of employee benefits by SMEs turnover (pa) / size

Doug Clothier, General Manager: SME at Old Mutual Corporate, says that this isn’t a surprising outcome as, at the start of a business, its owners are primarily concerned about survival. “The challenge therefore is to convince SME decision makers that it is possible to implement employee benefits in the early stages of their lifecycle.”

Another key finding is that most small and medium enterprises (SMEs), as well as their staff, see the value in employee benefits. It showed that around two-thirds of SME staff and nearly 70 percent of SME decision-makers believe that employee benefits influence the choice of company that people choose to work for. “Benefits provided to staff increase the value they derive from working for an employer, thereby making the business a more attractive place to work. But these benefits can also strengthen the commitment of staff to their employer as they feel more valued within the business,” says Clothier.

However, even though SMEs are aware of the many good reasons to offer employee benefits, there seems to be some resistance to offer employee benefit plans due to uncertainty as to whether they will be able to implement these solutions.

Why SMEs don’t have employee benefits in place

In response to the Old Mutual SME Employee Benefits Monitor 2015, decision makers in South African SMEs listed seven reasons for not having employee benefits schemes in place: affordability by the business; the view that the business is too small; perception that employees should make their own provision and that staff wouldn’t want to contribute; preference to provide higher salaries, high staff turnover making the option unviable; or that employee benefits are too administratively intensive.

Clothier emphasises that many, if not all, of these reasons are addressed by a good umbrella fund: “Many SMEs are not well informed about how accessible employee benefits actually are and how an umbrella fund can solve the problems SMEs anticipate when considering employee benefits.”

Old Mutual SuperFund enables SMEs to offer employee benefits

The findings reveal that SMEs are looking for employeebenefits solutions that are simple and flexible enough to fit their specific circumstances (see Table 2). This is precisely what Old Mutual SuperFund gives SMEs via a selection of solutions, including a completely pre-packaged solution that requires no fund expertise from the company.

“Table 2: Unique SME retirement funding requirements

By providing his type of standard solution, the process of offering employee benefits is significantly simplified as there are no confusing choices to be made. The fact that Old Mutual SuperFund is both simple and cost-effective means employee benefits are far less of a leap of faith for SMEs because it’s a solution they can easily get their heads around,” explains Clothier.

He adds that the real beauty in the design of the SuperFund is its ability to adapt and grow with an evolving SME business: “An SME can start early with a prepackaged SuperFund Easy solution, which is simple and affordably gets an employee benefits scheme in place.

Then as the business grows and its employees’ needs mature, they can switch to Old Mutual Superfund Choice. It can be tailored to the specific needs of the company and its employees.”

SME perspective

Old Mutual SuperFund has experienced strong growth among SMEs over the last year due to the company’s commitment to understanding the issues SMEs face and ensuring that distribution channels remain relevant to those SMEs. The Old Mutual Corporate SME division works closely with retail financial advisors to deepen relationships with SME owners and decision makers. Many SME owners and decision makers are likely to have an existing relationship with a financial advisor. Where these retail advisors are part of Old Mutual or offer Old Mutual products, the opportunity exists to raise awareness among SMEs about the many benefits Old Mutual SuperFund offers.

SMEs have different needs at different stages of their business lifecycle, in the same way that retail investors have different needs according to where they are on their retirement journey. In response, Old Mutual SuperFund offers tailored and responsive solutions to match the specific circumstances of each SME.

To view the full Old Mutual SME Employee Benefits Monitor 2015, please visit www.oldmutual.co.za / SMEMonitor.

Old Mutual is a Licensed Financial Services Provider.